GREENSBORO, N.C. (CN) - CVS Caremark, the nation's dominant pharmacy chain, uses and abuses the patient information it gets from handling prescriptions from competing pharmacies, by selling the information to drug companies and using it to solicit rivals' medical customers, independent pharmacies claim a federal class action. They say Caremark also violates state law by abusing its status as a pharmacy benefits manager to deny non-CVS customers coverage or reimbursement unless they get their refills at a CVS pharmacy.
"CVS Caremark is the largest provider of prescriptions in the United States, and fills or manages nearly 1.3 billion prescriptions annually," according to the complaint. "CVS Caremark ranks as the 18th largest company in the United States (by sales), with nearly $100 billion in sales in 2009. Nearly every retail pharmacy in the country must do business with CVS Caremark (as a pharmacy benefit manager), despite the fact that CVS Caremark's retail stores (CVS pharmacies) are direct competitors to non-CVS pharmacies, including the plaintiffs and other retail pharmacies across the state of North Carolina." (Parentheses in complaint.)
CVS Caremark "manages the prescription drug benefits of approximately 53 million consumers for at least 2,200 health care plans."
CVS Caremark was formed in 2007 when the CVS pharmacy chain merged with pharmacy benefits manager Caremark Rx. The complaint refers to pharmacy benefits managers as PBMs.
As a pharmacy benefits manager, "CVS Caremark obtains private information about patients which is then compiled by CVS Caremark to form a complete medical description and prescription history of the patient," the complaint states. "CVS Caremark then utilizes this information for its own financial gain to market products and services to (or 'to engage') the patients, and otherwise profits on the information by selling it to third parties such as drug companies. Thus, CVS
Caremark uses the patient information obtained in the process of filling or managing prescriptions for purposes beyond merely processing prescription claims.
"In its required notices of privacy practices under the Health Insurance Portability and Accountability Act ('HIPAA'), CVS Caremark declares that it uses and discloses a person's private health information across all of its affiliated businesses. This information is used, for example, to target and solicit non-CVS patients to bring their prescription drug business to CVS-owned retail stores, and to purchase general merchandise, including lucrative CVS-branded over-the-counter products. CVS Caremark also accepts payments from drug companies for directly marketing to those patients who are likely candidates for a drug because of their prescription history.
"CVS Caremark also uses patient information for their own financial gain by creating disincentives for a patient to access the pharmacy of his or her own choice."
Among the information CVS collects as a pharmacy benefits manager, "beyond merely processing prescription claims," are "the name, address, date of birth, and gender of the patient, as well as the identity of the prescribing physician, the specifics of the prescription medication and dosage and the identity of the dispensing pharmacy," the class claims.
CVS Caremark then markets its products and services to customers of its competitors and profits unfairly again by selling the information "to third parties such as drug companies," the class claims.
After a customer of a competing pharmacy fills a prescription, CVS Caremark sends the letter a letter and "timed communications," along with refill reminders and an additional letter if the patient does not refill the prescription at a CVS pharmacy, the class claims.
"CVS Caremark does not have a firewall between its PBM operations and its retail pharmacy operations that would prevent the illicit sharing of non-CVS customers' individually identifiable information between CVS Caremark (as PBM) and CVS Caremark (as retail pharmacy)," the class claims. (Parentheses in complaint.)
CVS Caremark also violates North Carolina's Pharmacy of Choice statute, which was implemented to prevent just such an abuse, by CVS programs "that require patients to fill their prescriptions for maintenance medications only at CVS Caremark-owned retail and mail pharmacies or be denied coverage and reimbursement," beyond two or three refills, the class claims.
It continues: "This is in spite of public assurances by CVS Caremark CEO Tom Ryan, prior to the merger, that 'We'll be agnostic [about] where the consumer fills their prescription.'"
The Federal Trade Commission investigated CVS Caremark from 2007-2009 for concerns that it did not properly protect patient information, the class claims. It adds: "In spite of the assurances that patient privacy would be protected, as recently as June 13, 2010, it was reported that private patient prescriptions were found blowing in the street outside of a CVS pharmacy in New York City."
Between 2004 and 2008, "28 different states investigated allegations that Caremark hired itself out to drug companies to target patients to switch to the pharmaceutical maker's drugs," the class claims.
The lead plaintiffs - Burton's Health Mart Pharmacy, Pike's Pharmacy and Dilworth Drugs - say that CVS Caremark's unfair practices "diminish competition, threaten independent pharmacies, and ultimately result in higher costs to consumers of pharmacy products and services."
They seek class certification, an injunction and damages for deceptive and unfair trade and violations of North Carolina's Pharmacy of Choice Act.
Lead counsel is Gary Jackson with Jackson & McGee of Charlotte.
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